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This morning Mr Justice Green handed down his 386 page decision in Tobacco Packaging [2016] EWHC 1169 rejecting applications for judicial review brought by several of the world's tobacco manufacturers in respect of The Standardised Packaging of Tobacco Products Regulations 2015 - the plain packaging rules - which are set to come into effect in the UK tomorrow.

The Regulations were introduced, in part, to the policy established by the World Health Organization (WHO) in the Framework Convention on Tobacco Control (FCTC). The FCTC provided a series of measures that contracting states were encouraged to adopt, including the prohibition on advertising on packaging and upon tobacco products (refereed to in the judgment as "standardized packaging" or commonly referred to as "plain packaging" - see Kat posts here). The decision summarizes this provision as follows:

"At
base it involves a substantial limitation being imposed upon the ability of
manufacturers to advertise or place branding upon the outer packaging or the tobacco
product itself. The Regulations do not however involve all tobacco products being
sold in a homogeneous, undifferentiated manner. The manufacturers can still place
the brand name and variant name upon the box and in this way they can still
communicate their identities to consumers and differentiate themselves from their
competitors. But the manner in which the name and brand may be used is highly
regulated in order, in effect, to strip away as much of the attractiveness of the
branding or advertising as possible."

Directive 2014/40/EU (the TPD) is the European legislation that implements the mandatory part of the FCTC. The Directive required certain restrictions to be introduced into Member States' laws in respect of the labelling and packaging of tobacco products. The TPD introduced a series of prohibitions relating to the presentation and appearance of different products.

Australia was the first country to introduce plain packaging restrictions. Giving evidence in this case, the Australian Government stated that, as confirmed by their post-implementation review, the legislation is working well, with data demonstrating that the measures were having a desired effect on the prevalence and use of tobacco in Australia. The UK Regulation was introduced without the benefit of the analysis of the Australian evidence on the basis that the UK Parliament considered that there was a real risk to public health and welfare if there was a delay in introducing the Regulation pending a full-blown analysis of the Australian evidence. Based on the evidence available, the UK Parliament felt that the measures in the Regulation would be effective.

The Grounds

The manufacturers contended that the Regulations were unlawful under international, EU law and domestic in numerous respects. Mr Justice Green consolidated these arguments into 17 Grounds of Challenge. Most of the the Grounds will be of interest to trade mark lawyers. In particular, in relation to Grounds 6-8 - Non-expropriation of property without compensation -the judge summarized his findings as follows:

"I reject the
submission however that the rights have been expropriated. Title to the rights in issue
remains in the hands of the tobacco companies; the Regulations curtail the use that
can be made of those rights but they are not expropriated. Indeed, the rights remain
important in the hands of the tobacco companies because the word marks can still be
used on packaging and will serve their traditional function as an identifier of origin. I
accept that the figurative marks cannot be used in this manner but they still have
certain, admittedly very limited, vestigial uses, which the Regulations do not curtail.
Further the restrictions imposed pursue a legitimate public health based interest; a
conclusion not challenged by the Claimants. These two factors (retention of title and
measures imposed for legitimate public interest reasons) are in large measure
sufficient to defeat in law the submission that the rights have been expropriated."

What does a trade mark actually do - exclude or use?

Diving into this finding, you will find an interesting section on the judge's analysis on how to define a trade mark right - is it a negative right to exclude or a positive right to use? The decision goes through a long analysis of the case law on the nature of trade mark rights. Counsel for the Secretary of State argued that it is a negative right. Because the Regulation merely limited the "use" of trade marks they did not strip away the trade mark owner;s right to prevent or exclude others from using their mark (citing Arnold J in Pinterest v Premium Interest).

Counsel for the manufacturers said that this position was artificially narrow in that it did not look at the "essence" or "substance" of a trade mark, since the real value of a trade mark for the purposes of Article 1 of the First Protocol of the ECHR is in its commercial exploitation (i.e. its use). A trade mark would be an "economic hollow shell" if it could not be so used. The "substance over form" analysis was the relevant test when looking at the Charter. Under the Regulation, symbol or figurative marks could no longer be used at all either on packaging or on
the tobacco products themselves, whereas the name trade marks could at least be used
albeit only in a highly circumscribed manner. Counsel for the manufacturers also cited the High Court of Australia's decision in JTI International v Commonwealth of Australia where the court accepted that the Australian measure had, in respect of the trade mark rights:

“rendered useless for all practical purposes”, according to Heydon J, at 216); and on
the basis that “rights to exclude others from using property have no substance at all if
use of the property is prohibited” (according to French CJ, 37); and that “each
property right conferred included a right of use by the owner” (according to Heydon J
at 216); and/or that the owners’ proprietary rights included “the right to turn the
property to valuable account by licence or assignment” (Crennan J at page [264].

"It follows that in
delineating the property rights in issue a Court is not confined to the narrow and
legalistic task of identifying and “classifying” what the bare minimum legal essence
of the right is. And as to practical, real world, substance it is clear, and was not in
fact disputed by the Secretary of State, that the economic value of a trade mark lay in
its use as well as its ability to exclude. In particular, the commercial value of a trade
mark lay in its ability to forge links of recognition or identity and reputation in the
mind of consumers. The Claimants adduced a substantial body of evidence on this
which included evidence of international transactions where trade marks had
accounted for a significant portion of the consideration paid."

Even so, Green J concluded that the substance of the rights have not been wholly destroyed, although he did accept that they had been "significantly and even substantially diminished". At [745] he held:

"On
the contrary the rights retain important functions. Regulation 13 explicitly protects
against revocation for non-use and preserves the rights attached to registration and
hence the right to prevent others from using the trade marks in an unauthorised
manner. This is not, as was submitted, an illusory or fictitious exercise; on the
contrary the Regulations permit tobacco companies to both place their name and the
brand name on the packaging. As such the trade marks still serve their core function
as an identifier of origin."

"I accept that the Regulations do substantially limit and restrict the use of those
rights but they do so for entirely proper and legitimate reasons and they do so striking a fair
balance between the right to property and opposing public health interests and rights. I
have in this regard rejected the contention that the tobacco companies should entitled to
any compensation at all. I cannot see any logical or rational basis for imposing upon the
State a duty to pay compensation to the tobacco companies for ceasing to engage in an
activity which facilitates a health epidemic and imposes vast costs upon the state.

...

When one stands back from the immense detail of these challenges, as the Secretary of
State submitted during the hearings, the essence of the case is about whether it is lawful for
States to prevent the tobacco industry from continuing to make profits by using their trade
marks and other rights to further what the World Health Organisation describes as a health
crisis of epidemic proportions and which imposes an immense clean‐up cost on the public
purse.
In my judgment the Regulations are valid and lawful in all respects.

There is no basis upon
which I could or should strike down the Regulations or prevent them coming into effect
tomorrow. "

This judgment follows the CJEU's decision earlier this month holding that the TPD is valid (see decision here). The AmeriKat plainly has not read all 386 pages of the decision in detail, so imagines that there will be a wealth of further analysis on the decision to come and its bearing on trade mark law and principles. In the meantime, Reuters is reporting that BAT is planning to appeal the decision, whereas Philip Morris has not (see press release here).